Bill Gates is an epitome of foresight, recently refusing to divest from fossil fuels on the premise that instead he will invest in energy innovation. Here are three reasons why, in my opinion, this is a stellar strategy:
1. SCALABILITY: Current renewables are not anywhere close to supporting the world. Divesting from fossil fuels is what is termed as 'negative screening' - excluding anything with social or environmental externalities from your investment portfolio (fossil fuels/arms manufacturing/drugs). To me that is running away from the problem, not solving it.
2. INNOVATION: Its far wiser to include positive investments to 'bend the curve' (such as clean energy/peacebuilding efforts/community building). The solution lies in disruptive technology that can revolutionize the energy landscape - which will take astronomical amounts of capital.
3. SUSTAINABILITY: To sustain one's impact trajectory in the long term one needs to survive in the short term. Maybe financial returns today made from fossil fuel investments can be invested in exploring solutions that can help achieve environmental and social returns tomorrow. It is that trade off we need to consider - even the best of intentions can be myopic and it is imperative for investors to think about the bigger picture for building a better future.
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In March, the Guardian launched a campaign calling on the Gates’ Foundation and the Wellcome Trust to divest from coal, oil and gas companies. More than 223,000 people have since signed up to the campaign. Gates dismissed the calls of the fossil fuel divestment movement – which has already persuaded more than 220 institutions worldwide to divest – on the basis that it would have little impact. Instead he said there was an urgent need for “high risk” investments in breakthrough technologies. He said that a “miracle” on the level of the invention of the automobile was necessary to avoid a climate catastrophe and that current renewables are not yet close to being able to meet projected energy needs by 2030.